What Is a Strata Management Statement?

What Is a Strata Management Statement?

How strata title buildings are managed is an essential aspect of the apartments market and the success of medium and high density living has been aided by the quality of legislation and management.

Mixed use developments are now very popular and a vital link in helping to create interesting and vibrant urban design and communities.

As mixed use developments become more common it’s a good idea to understand how a Strata Management Statement (SMS) works and why they are so important in managing these projects. Existing apartment owners and first-time buyers may not be aware of the facts surrounding an SMS.

SMS & BMC and Mixed Use Developments

If you’re buying an apartment in a mixed-use development, there are two terms you should become familiar with, there are SMS: Strata Management Statement and BMC: Building Management Committee.

Mixed use developments generally comprise of shops, residential apartments, commercial space and commercial car parks. These developments can be simple, with just a few small shops under an apartment building with shared parking or, more complex developments with a full shopping centre, commercial space, a large number of apartments and a major car park in a single development, often over many stages.

All parts of the building may well be in different forms of ownership, as such they require professional management and maintenance.

A registered SMS is the key instrument and required by law. The SMS must be registered on the titles of the strata and a major focus is the complex requirements of the development’s management, maintenance shared expenses and shared services. The SMS must be registered with the Registrar General.

For an owner of a strata apartment located in a mixed-use development it is worth understanding what things a SMS must address and how they work. The SMS must establish a BMC, so that the development is managed as a single entity with owners of the various elements all represented.

The SMS must set out the structure and function of the BMC and the activities needed to manage and maintain the building.

How any disputes are resolved is also a key element in the statement, along with how notices are delivered. Another is provisions dealing with insurances of the building, which is often a key cost and given the complexities involved, insurance is a big issue.

However, there are many other matters that must be contained in the statement. Some of these matters include: access, storage and collection of garbage, meeting of the BMC, security, appointment of a managing agent, noise management, trading regulations, service contracts and a code that preserves the architectural appearance of the building.

It is essential to appreciate that when the statement is registered as a deed it impacts all owners, mortgagees and lessees of any part of a building subject to an SMS. It’s also the key reason why the BMC is so important. The SMS also operates to detail the complex easements that are involved with some mixed-use developments.

It does not take much imagination to appreciate how many easements might be required in any mixed-use development, for people, be the visitors of residents, for cars and deliveries, for people shopping, the details are also subject to how the strata scheme operates.

In a mixed-use building the different elements exist as ‘stratum’ and each stratum contains the different building elements such as apartments, retail, car parking or commercial space, as distinct but connected elements.

Some very early examples in Australia include the Paradise Centre, Surfers Paradise, The Conaught in Sydney which includes a YMCA, Eastgate Gardens, Bondi Junction and more recently King Street Wharf, which is a complex example. It has often been commented that the best mixed-use developments are a combination of a well-designed building and quality and well considered SMS and BMC provisions.

Shared Facilities

The management and up-keep of shared facilities is a major part of any SMS. Shared facilities include access ways, stairs, elevators, water supplies, fire safety equipment, pumps, fans, hot water etc.

The key differences when detailing shared facilities in a mixed-use development revolve around equipment used by only one component, as opposed to equipment used by 2 or more components, is where a facility is shared.

These facilities are usually set out in a detailed strata management schedule or as part of the SMS. The shared facilities operate within a set of key legal documents:

Strata management statement

Building management statement

Easements and covenants

Umbrella management agreement.

It is also necessary that the body corporate has a by-law in place that allows the strata management committee to appoint a body corporate representative to the building management committee.

A strata management statement always means that a body corporate is associated with one of the stratum lots in a building. The relevant strata titles legislation must be referred to in any SMS. The BMC is associated with both a SMS and a building management statement.

Strata Managing Agent

The appointment of a managing agent to look after the affairs, sometimes complex, within in an SMS is an important provision.

A key requirement for anyone buying into a mixed-use development would be to become familiar with not only the body corporate by-laws, but also the SMS. This relationship is an essential area for any managing agent because they have a key role in the building and at times there will be a need to balance the needs of a residential stratum with other uses.

A managing agent under the SMS does not have to be the same as the agent acting as the strata managing agent, but it can because of the size and complexity of some projects, be a more streamlined way to make such appointments.

Strata fees can be influenced by how the shared facilities mentioned earlier are structured, the managing agent and building manager are very important in how a budget for the building is prepared and then managed.

Usually an amount will be included in the strata fees that is payable to a BMC, for example an apartment owner’s responsibility for shared facilities. Careful budgeting is required to ensure costs are managed and proportioned correctly.

Large and complex mixed use developments are likely to become more common and more complex. However, apartment owners and investors can be sure that current legislation covering any SMS and its relationship to the more general application of a strata plan and its by-laws has a strong foundation in law and administration. This creates the ideal foundation for even the most complicated development.

Project Agenda is dedicated to the many and varied aspects of Residential Project Marketing. The core idea, championed by Peter Chittenden, is to highlight not only market trends, but to also examine some of the many unique aspects associated with apartment living across a constantly evolving demographic. Comments, ideas and suggestions are always welcome.